Research Discussion Papers, Bank of Finland
No 20/2001:
Output gaps and technological progress in European Monetary Union
Maria Antoinette Dimitz
Abstract: Output gaps for ten European countries and the USA are
estimated based on a CES production function with input augmentation in
technological progress. The substitution parameter is estimated from the
coefficients of the labour and capital demand functions. Estimation is
carried out using Johansen’s cointegration method. For six of the eleven
countries analysed, the use of the Cobb Douglas form would not be
appropriate. The output gap estimates show a similar cyclical pattern for
all countries. They remain mostly within +/-4% except for Finland and
Greece. Separating labour-augmenting and capital-augmenting technological
progress gives insight into the driving forces of growth for individual
countries.
Keywords: output gap; potential output; CES production function; EMU; (follow links to similar papers)
JEL-Codes: C32; E32; (follow links to similar papers)
33 pages, September 28, 2001
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